Five Latin America ETFs to Watch in 2011

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Includes: EPU, EWW, EWZ, GML, ILF
by: Tom Lydon

Latin America is one emerging market region to keep close tabs on. But the region has a lot of moving parts, which has resulted in varying performance in their ETFs.

Brazil. It’s been a flat year for Brazil. iShares MSCI Brazil Index Fund (NYSEARCA:EWZ) is up a scant 0.3% in the last year as of this writing. Will changes in 2011 get things going again?

Dilma Rousseff will step in as the new president on Jan. 1, but analysts weren’t too keen on Finance Minister Guido Mantega retaining his job, reports Robert Plummer for BBC. A few observers are also concerned that the economy could slow and that Rousseff will provide the government a bigger role in key areas, such as the oil industry, reports Terry Wade for Reuters. Watch Brazil closely as the new leadership steps in; this one could go either way.

Mexico. U.S. Secretary of State Hillary Clinton summed the country’s situation up by comparing it to the Colombian insurgency of the 1980s. Still, the country’s manufacturing sector is doing well, most notably car manufacturers. iShares MSCI Mexico (NYSEArca: EWW) is up 21.6% in the last year, and if its exports can stay strong, 2011 count bring more good to the economy.

Peru. Peru’s economy is expected to grow 8.3% for 2010, one of the highest rates in Latin America. Likewise, iShares MSCI Peru (NYSEArca: EPU) is up 53% in the last year. Investors should watch for any delays in mining or oil projects.

Latin America and Caribbean economies are forecast to post 6% growth this year, according to Fox News Latino. ECLAC estimates that total growth will be 4.2% due to a more pessimistic global outlook and reduced public spending. South American economies expanded an average 6.6% while Mexico and Central America grew an average 4.9%.

Leading the economic growth, Paraguay’s economy expand by 9.7%, followed by Uruguay at 9%, Peru at 8.6%, Argentina at 8.4%, Brazil at 7.7% and Chile and Mexico, both at 5.3%. At the bottom of the list, Haiti dropped 7% and Venezuela fell 1.6%, says ECLAC forecasters.

If you’re looking to nab broad exposure to Latin America, check out SPDR S&P Emerging Latin America (NYSEArca: GML) or iShares S&P Latin America 40 Index (NYSEArca: ILF). Both ETFs, however, have a more than 60% weight in Brazil and 20% in Mexico, essentially making them primarily Brazil and Mexico plays.

Max Chen contributed to this article.

Disclosure: None